Having recently secured licensing agreements with some of the industry’s biggest players, Facebook is gearing up for a serious push into music. But how has it faired so far in its relationship with rightsholders? And what will these deals mean for the music business? Eamonn Forde takes a look…
In terms of The Billion Club – those platforms with over a billion regular users – the music industry has turned its guns on just YouTube as a bad actor, accusing the video site of gaming the safe harbour exemptions in digital copyright law and, as a result of what it terms the “value gap”, short-changing creators and copyright owners.
The other key player, for the music industry at least, in this Billion Club is Facebook, but it has been given a much easier time. That is mainly because the promotional and marketing benefits are seen to massively outweigh any copyright infringement issues, with minor instances of “freebooting” – users ripping videos or tracks from elsewhere and uploading to their pages – being seen as a mosquito compared to YouTube’s Dracula.
Record labels and artists rarely uploaded full videos to the site, opting instead to use 30-second clips and re-direct users to Vevo or – somewhat ironically – YouTube. That was because Facebook paid no royalties for any content on its platform and even, with deft and regular recalibration of its algorithms whereby “organic reach” became close to invisible, forced labels and artists to pay to boost their posts. The contradiction of battling YouTube over how little it paid rightsowners versus Facebook paying nothing while charging you to actually get your content in front of everyone was brushed away amid arguments about reach and ROI.
While most music content on Facebook has been under half a minute, the arrival of Facebook Live saw it go long form – with whole concerts and special shows being broadcast on the platform and often held there for two days so they could be watched on demand. All the while with rightsowners knowing zero royalties were being generated. Their argument, of course, was they were in control of what music content was available through Facebook unlike on YouTube where takedown requests were no guarantee that the disputed content would stay down.
But the long game here was finally revealed just before Christmas.
Universal Music Group was first out of the gates with a global licensing deal with Facebook (also covering Instagram and VR platform Oculus, both Facebook-owned properties). As is often the way, exact financial terms of the deal were not revealed, but this agreement would allow users to upload Universal-controlled content to their pages but Facebook will no longer have to instruct them to take it down.
Universal hailed the deal as “unprecedented” and said “the agreement is intended to serve as a foundation for a strategic partnership roadmap that will deliver new music-based experiences online”.
The initial deal was focused on ensuring UGC using the company’s music could a) stay online and b) be monetised. But there was also mention of longer-term plans. Universal’s statement on the agreement added, “Going forward, the companies will experiment hand-in-hand to introduce new music-based products to these Facebook platforms, including Messenger, with the goal of catalyzing innovation to develop the next generation of music products that best engage social consumers.”
This was widely seen as a move by Facebook to ramp up its video ambitions, with video set to dominate in terms of social content in the coming years.
As is often the case in music licensing, as soon as one key player breaks from the pack, the others are quick to follow suit. By the start of January, publisher Sony/ATV signed a similar, multi-year, deal to the Universal one with Facebook.
Mere days later Irving Azoff – one of YouTube’s most vociferous critics over the value gap – announced his Global Music Rights PRO had reached an agreement with Facebook, its first for any UGC platforms. “Our partnership with Facebook reflects that when music is valued properly, it’s easy for both sides to view it as a win-win,” said Azoff, a man who does not toss compliments about freely.
On the same day, Kobalt Music Publishing signed its own deal with the social network. On top of this, SESAC and HFA/Rumblefish signed up to deals covering songwriters signed to independent publishers.
David Israelite, the president of the National Music Publishers’ Association called the deals here “a great step forward for the platform and for songwriters”, but also used his statement to throw shade at others. “We appreciate Facebook’s willingness to recognise the economic contribution of songwriters as well as its effort to create a system that properly streamlines payments moving forward,” he said. “Other digital services should take note and follow suit.”
It was not a great leap to know he was talking about YouTube here. It also marked an end to the sabre rattling that Israelite was party to here. He previously castigated the company in a Billboard op-ed in October 2016, accusing it of riding roughshod over copyright owners’ wishes with regard to takedowns.
“Facebook’s inactivity and unresponsiveness has left publishers no other choice but to attempt to remove the music that amounts to stealing from their songwriters,” he wrote. “To aid in this effort, NMPA and our member publishers have sent thousands of takedown requests, but this is merely a drop in the bucket.”
He was still sharpening his sabre at the start of last year. “I think our next big fight is with Facebook,” he told Billboard, urging a deal to be struck. “Being business partners isn’t only smarter, it’s the right thing to do – and I think they want to do the right thing.”
To date, not all deals have been announced (but the licensing momentum so far suggests they will be soon). Even so, it seems that Facebook is looking to close the book as quickly as it can in order to move onto whatever its music-centric initiatives are.
However, TuneRegistry, in a blog post to its members on 9th January, revealed there is a fast-approaching deadline of 12th March for them to get on board.
“With billions of users consuming millions of hours of video on Facebook and Instagram, which embodies sound recordings and compositions, the thought of Facebook rolling out monetization to independent songwriters and publishers makes us giddy!” it said. “All you must do is opt-in to the deal (if you wish) and deliver your composition data to HFA (which can be done quickly via your TuneRegistry account). The deadline to opt-in to Facebook’s direct license agreement is on or before March 12, 2018.”
Nothing happens in a vacuum and this has been brewing for some time, with lots of discussions happening behind closed doors and chess pieces being moved around the board to allow it all to happen.
In January last year, Facebook hired Tamara Hrivnak “to lead global music strategy and business development”, poaching her from Google where she was director of music partnerships for Google Play and YouTube. In November, another key appointment was made when Jeremy Sirota became Facebook’s label music business development manager, having previously been SVP, head of business & legal affairs for Warner Music Group’s WEA and ADA arms.
Clearly part of any deal with Facebook was going to be contingent on its proving it had a robust copyright protection system – and allying the industry’s fears that it was not going to be the same sieve that it accused YouTube’s ContentID system of being. Facebook had been working on this since 2016 and public proof it was working came in March 2017 when Charlotte Campbell, a musician specialising in covers, was temporarily locked out of her Facebook account for uploading a cover of Ed Sheeran’s ‘Castle On The Hill’.
This was clearly working well enough for deals with copyright holders to be struck – and the negotiations were always going to be different to how they played out initially with YouTube. The music industry felt that it was on the back foot with YouTube from the off because it was up and running long before they had a chance to negotiate from a position of strength (hence Warner temporarily pulling its music in 2008, PRS following suit in 2009 and GEMA in Germany only reaching a deal with the service in in November 2016 after a seven-year standoff). It seems the talks with Facebook are happening before its serious push into music actually happens.
But it is not all just contingent on copyright protection and takedown safeguards. Monetisation is a huge part of it. Facebook is an enormously successful company and its most recent financial figures spell out just how profitable it is. It reported its revenues in Q3 2017 were up 47% year-on-year to $10.33bn; its net profits for the period were up 79% year-on-year to $4.71bn.
As a result, it also has a lot of money to invest in original content – and the music business will be keen to take a significant share of that. In September last year, the Wall Street Journal reported it was planning on spending at least $1bn on original content for Watch, its on-demand video offering.
The music industry has been haunted for over three decades by “the MTV issue” – where it saw videos as purely promotional and let the channel become a global brand without having to pay broadcast royalties for years. It swore it would never do this again. But it happened with iTunes, which had the whip hand in negotiations. And again with YouTube. The turning point was Spotify where rightsowners got equity in the company as well as royalties. They were never going to get equity in Facebook this late in the day, but the indications are the opening deals are ones they are content with.
Content with – for now. An armistice has been reached, but how long it holds is another matter. As any student of the music industry will tell you, what is seen as a good deal for the business today is not always a good deal for tomorrow.